Consumer Confidence Rebounds Modestly In May - May 27, 2014

The much anticipated latest reading on consumer confidence, which was issued shortly after today’s market opening, generally matched expectations. All told, the Consumer Confidence Index, a monthly survey based on a probability design random sample conducted by The Conference Board, rebounded in May after declining during the month of April.

Specifically, the Consumer Confidence Index rose from 81.7 in April to 83.0 in May. This latest reading is encouraging, as the consumer accounts for the largest portion of the nation’s economic output. It also is an indication that the earlier malaise likely caused by a long and arduous winter season has abated. This, combined with an improving U.S. labor market, gives some confidence that the scant first-quarter GDP reading of 0.1% was likely a one-time event and the rate of economic expansion should pick up as 2014 progresses.

According to Lynn Franco, Director of The Conference Board Consumer Research Group, “Consumer confidence improved slightly in May, as consumers assessed current conditions, in particular the labor market, more favorably. Expectations regarding the short-term outlook for the economy, jobs, and personal finances were also more upbeat.” To wit, the percentage of consumers expecting their incomes to grow over the next six months is the highest since December, 2007. Too, recent prices at both the producer and consumer levels remain rather tame, for the most part, which should also help the cause of the consumer in the month ahead.

A closer examination of the latest report also unveiled some positive developments. While those claiming business conditions are “good” fell from 22.2% to 21.1%, those claiming business conditions are “bad” dropped to 24.1% from 24.8%. Too, the survey showed that consumers’ appraisal of the job market was more upbeat than it was in April, as those saying jobs are “plentiful” increased to 14.1%, from 13.0%. Moreover, those same consumers expecting business conditions to improve over the next six months edged up from 17.2% in April, to 17.5% in the current month.

All in all, the latest consumer assessment was much more favorable than those of the last few months when, as noted, weather-related issues may have kept some consumers out of the market. The consumer confidence report, along with some positive data on the housing market issued last week, were encouraging signs ahead of the upcoming summer months when families are deciding whether or not to spend on big-ticket items such as vacations and travel.

The author did not have positions in any of the companies mentioned at the time of this article's writing.